UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

THE STATE OF TEXAS

By Attorney General Ken Paxton

THE STATE OF ARKANSAS

By Attorney General Leslie Rutledge

THE STATE OF IDAHO

By Attorney General Lawrence G. Wasden

THE STATE OF INDIANA

By Attorney General Curtis Hill

COMMONWEALTH OF KENTUCKY

By Attorney General Daniel Cameron

THE STATE OF MISSISSIPPI

By Attorney General Lynn Fitch

STATE OF MISSOURI

By Attorney General Eric Schmitt

STATE OF NORTH DAKOTA

By Attorney General Wayne Stenehjem

STATE OF SOUTH DAKOTA

By Attorney General Jason R. Ravnsborg

and

STATE OF UTAH

By Attorney General Sean D. Reyes

Plaintiffs,

vs.

GOOGLE LLC,

Defendant.

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Civil Action No. ___________

JURY TRIAL DEMANDED

COMPLAINT

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TABLE OF CONTENTS

I. NATURE OF THE CASE ............................................................................................................ 1

II. PARTIES .................................................................................................................................. 8

III. JURISDICTION ..................................................................................................................... 9

IV. VENUE ................................................................................................................................. 9

V. INDUSTRY BACKGROUND ..................................................................................................... 10 A. Online Display Advertising Markets ................................................................................ 11

1. Publishers’ Inventory Management Systems (Ad Servers) .......................................... 12 2. Electronic Marketplaces for Display Advertising: Exchanges and Networks .............. 16

i. Display Ad Exchanges .............................................................................................. 16 ii. Ad Networks for Display and Ad Networks for Mobile In-App Inventory ............. 19

3. Ad Buying Tools for Large and Small Advertisers ...................................................... 21

VI. THE RELEVANT MARKETS AND GOOGLE’S MARKET POWER ....................................... 26 A. Publisher Inventory Management: Publisher Ad Servers ................................................. 26

1. Publisher ad servers in the United States are a relevant antitrust market. .................... 26 2. Google has monopoly power in the publisher ad server market. .................................. 28

B. Display Ad Exchanges ...................................................................................................... 29 1. Display ad exchanges in the United States are a relevant antitrust market. ................. 29 2. Google has monopoly power in the display ad exchange market. ................................ 31

C. Display Ad Networks ........................................................................................................ 33 1. Display ad networks in the United States are relevant antitrust market. ...................... 33 2. Google has monopoly power in the display ad network market. .................................. 34

D. Display Ad Buying Tools for Large and Small Advertisers ............................................. 35 1. Display ad buying tools for small advertisers in the United States is a relevant antitrustmarket. .................................................................................................................................. 35 2. Display ad buying tools for large advertisers in the United States is a relevant antitrustmarket. .................................................................................................................................. 36 3. Google has monopoly power in the ad buying tool market for small advertisers. ....... 36

VII. ANTICOMPETITIVE CONDUCT .......................................................................................... 38 A. Google forces publishers to license Google’s ad server and trade in Google’s adexchange. .................................................................................................................................. 38 B. Google uses its control over publishers’ inventory to block exchange competition. ....... 43

1. Google blocks publishers from sending their inventory to more than one marketplace ata time. .................................................................................................................................... 44 2. Google gives itself preferential treatment by routing publisher inventory to its own adexchange and blocks competition from other exchanges. .................................................... 45 3. Google restricts information to foreclose competition and advantage itself. ............... 47

i. Information asymmetry causes advertisers to trade on non-Google exchanges at theirown risk. ............................................................................................................................ 49 ii. Google forecloses competition by using inside information to win auctions. .......... 49 iii. Google uses privacy concerns to advantage itself. ............................................... 53

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1. The States of Texas, Arkansas, Idaho, Indiana, Mississippi, Missouri, North

Dakota, South Dakota, Utah, and the Commonwealth of Kentucky, by and through their

Attorneys General (collectively, the “Plaintiff States”), bring this action against Google LLC

(“Google”) under federal and state antitrust laws and deceptive trade practices laws and allege as

follows:

I. NATURE OF THE CASE

2. The halcyon days of Google’s youth are a distant memory. Over twenty years ago, two

college students founded a company that forever changed the way that people search the internet.

Since then, Google has expanded its business far beyond search and dropped its famous “don’t be

evil” motto. Its business practices reflect that change. As internal Google documents reveal,

Google sought to kill competition and has done so through an array of exclusionary tactics,

including an unlawful agreement with Facebook, its largest potential competitive threat, to

manipulate advertising auctions. The Supreme Court has warned that there are such things as

antitrust evils. This litigation will establish that Google is guilty of such antitrust evils, and it

seeks to ensure that Google won’t be evil anymore.

3. Google is an advertising company that makes billions of dollars a year by using

individuals’ personal information to engage in targeted digital advertising. Google has extended

its reach from search advertising to dominate the online advertising landscape for image-based

web display ads. In its complexity, the market for display ads resembles the most complicated

financial markets: publishers and advertisers trade display inventory through brokers and on

electronic exchanges at lightning speed. As of 2020, Google is a company standing at the apex of

power in media and advertising, generating over $161 billion annually with staggering profit

margins, almost all of it from advertising.

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4. Google’s advertising apparatus extends to the new ad exchanges and brokers through

which display ads trade. Indeed, nearly all of today’s online publishers (be they large or small)

depend on one company—Google—as their middleman to sell their online display ad space in “ad

exchanges,” i.e., the centralized electronic trading venues where display ads are bought and sold.

Conversely, nearly every consumer goods company, e-commerce entity, and small business now

depend on Google as their respective middleman for purchasing display ads from exchanges in

order to market their goods and services to consumers. In addition to representing both the buyers

and the sellers of online display advertising, Google also operates the largest exchange AdX. In

this electronically traded market, Google is pitcher, batter, and umpire, all at the same time.

5. The scale of online display advertising markets in the United States is extraordinary.

Google operates the largest electronic trading market in existence. Whereas financial exchanges

such as the NYSE and NASDAQ match millions of trades to thousands of company symbols daily,

Google’s exchange processes about online ad spaces each day. In Google’s words,

At the same time, Google owns the largest buy-side and sell-side brokers. As one

senior Google employee admitted,

Or more accurately, the analogy would be if were a monopoly

financial broker and owned the which was a monopoly stock exchange.

6. Google, however, did not accrue its monopoly power through excellence in the

marketplace or innovations in its services alone. Google’s internal documents belie the public

image of brainy Google engineers having fun at their sunny Mountain View campus while trying

to make the world a better place. Rather, to cement its dominance across online display markets,

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Google has repeatedly and brazenly violated antitrust and consumer protection laws. Its modus

operandi is to monopolize and misrepresent. Google uses its powerful position on every side of

the online display markets to unlawfully exclude competition. It also boldly claims that “we’ll

never sell your personal information to anyone,” but its entire business model is targeted

advertising—the purchase and sale of advertisements targeted to individual users based on their

personal information. From its earliest days, Google’s carefully curated public reputation of “don’t

be evil” has enabled it to act with wide latitude. That latitude is enhanced by the extreme opacity

and complexity of digital advertising markets, which are at least as complex as the most

sophisticated financial markets in the world.

7. The fundamental change for Google dates back to its 2008 acquisition of DoubleClick,

the leading provider of the ad server tools that online publishers, including newspapers and other

media companies, use to sell their graphical display advertising inventory on exchanges. As the

new middleman between publishers and exchanges, Google quickly began to use its new position

to exert leverage. For instance, Google started requiring publishers to license Google’s ad server

and to transact through Google’s exchange in order to do business with the one million plus

advertisers who used Google as their middleman for buying inventory. So Google was able to

demand that it represent the buy-side, where it extracted one fee, as well as the sell-side, where it

extracted a second fee, and it was also able to force transactions to clear in its exchange, where it

extracted a third, even larger, fee.

8. Within a few short years of executing this unlawful tactic, Google successfully

monopolized the publisher ad server market and grew its ad exchange to number one, despite

having entered those two markets much later than the competition. With a newfound hold on

publisher ad servers, Google then proceeded to further foreclose publishers’ ability to trade in

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exchanges. Google imposed a one-exchange-rule on publishers, barring them from routing

inventory to more than one exchange at a time. At the same time, Google demanded that sellers

route their ad space to Google’s exchange because doing so would serve the sellers’ best interest

and maximize revenue. As internal documents reveal, however, Google’s real scheme was to

permit its exchange to .

One industry publication put it succinctly: “[t]he lack of competition was costing pub[s] cold hard

cash.”

9. In an attempt to reinject competition in the marketplace, publishers devised a new

innovation called header bidding. Header bidding routed ad inventory to multiple neutral

exchanges each time a user visited a web page in order to return the highest bid for the inventory.

At first, header bidding bypassed Google’s stranglehold. By 2016, about 70 percent of major online

publishers in the United States had adopted the innovation. Advertisers also migrated to header

bidding in droves because it helped them to optimize the purchase of inventory through the most

cost-effective exchanges.

10. Google quickly realized that this innovation substantially threatened its exchange’s

ability to demand a very large— percent—cut on all advertising transactions. Header

bidding also undermined Google’s ability to trade on inside and non-public information from one

side of the market to advantage itself on the other—a practice that in other markets would be

considered insider trading or front running. As a result, and as Google’s internal communications

make clear, Google viewed header bidding’s promotion of genuine competition as a major threat.

In Google’s words, it was an

11. Google responded to this threat of competition through a series of anticompetitive

tactics. First, Google ceded ground and started to allow publishers using its ad server to route their

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inventory to more than one exchange at a time. However, Google’s program secretly let its own

exchange win, even when another exchange submitted a higher bid. Google’s codename for this

program was —a character name from Star Wars. And as one Google employee explained

internally, Google deliberately designed the program to avoid competition and the program

consequently hurt publishers. In Google’s words, the program

Next, Google

tried to come up with other creative ways to shut out competition from exchanges in header

bidding. During one internal debate, a Google employee proposed a

. A second employee captured Google’s ultimate aim of

destroying header bidding altogether, noting in response that

Google wanted to be more aggressive.

12. Google grew increasingly brazen in its efforts to undermine competition. In March

2017, Google’s largest Big Tech rival, Facebook, announced that it would throw its weight behind

header bidding. Like Google, Facebook brought millions of advertisers on board to reach the users

on its social network. In light of Facebook’s deep knowledge of its users, Facebook could use

header bidding to operate an electronic marketplace for online ads in competition with Google.

Facebook’s marketplace for online ads is known as “Facebook Audience Network” or FAN.

Google understood the severity of the threat to its position if Facebook were to enter the market

and support header bidding. To diffuse this threat, Google made overtures to Facebook. Internal

Facebook communications reveal that

. As one Facebook executive acknowledged,

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13. Any collaboration between two competitors of such magnitude should have set off the

loudest alarm bells in terms of antitrust compliance. Apparently, it did not. Internally, Google

documented that if it could not

Indeed, Facebook understood Google’s rationale as a monopolist very

well. An internal Facebook communication at the highest-level reveals that Facebook’s header

bidding announcement was part of a planned long-term strategy—an “

”—to draw Google in. Facebook decided to dangle the threat of competition in Google’s

face and then cut a deal to manipulate the auction.

14. In the end, Facebook curtailed its involvement with header bidding in return for Google

giving Facebook information, speed, and other advantages in the auctions that Google

runs for publishers’ mobile app advertising inventory each month in the United States. In these

auctions, Facebook and Google compete head-to-head as bidders. Google’s internal codename for

this agreement, signed at the highest-level, was —a twist on the character name from Star

Wars. The parties agree on for how often Facebook would publishers’ auctions—

literally manipulating the auction with for how often Facebook would

bid and win.

15. Above and beyond its unlawful agreement with Facebook, Google employed a

number of other anticompetitive tactics to shut down competition from header bidding. Google

deceived exchanges into bidding through Google instead of header bidding, telling them it would

stop front running their orders when in fact it would not. Google employees also deceived

publishers, telling one major online publisher that it should cut off a rival exchange in header

bidding because of a strain on its servers. After this misrepresentation was uncovered, Google

employees discussed playing a trick—a —on the industry to nonetheless get

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publishers to cut off exchanges in header bidding. Google wanted to

Google then proceeded to cripple publishers’

ability to use header bidding in a variety of ways.

16. Having reached its monopoly position, Google now uses its immense market power to

extract a very high tax of percent of the ad dollars otherwise flowing to the countless

online publishers and content producers like online newspapers, cooking websites, and blogs who

survive by selling advertisements on their websites and apps. These costs invariably are passed

onto the advertisers themselves and then to American consumers. The monopoly tax Google

imposes on American businesses—advertisers like clothing brands, restaurants, and realtors—is a

tax that is ultimately borne by American consumers through higher prices and lower quality on the

goods, services, and information those businesses provide. Every American suffers when Google

imposes its monopoly pricing on the sale of targeted advertising.

17. From its earliest days, the internet’s fundamental tenet has been its decentralization:

there is no controlling node, no single point of failure, and no central authority granting permission

to offer or access online content. Online advertising is uniquely positioned to provide content to

users at a massive scale. However, the open internet is now threatened by a single company.

Google has become the controlling node and the central authority for online advertising, which

serves as the primary currency enabling a free and open internet.

18. Google’s current dominance is merely a preview of its future plans. Google has an

appetite for total dominance, and its latest ambition is to transform the free and open architecture

of the internet. Google’s plan is to create a walled garden around the internet in which it controls

websites and mobile applications. Google calls its emerging venture the , a world in

which publisher content is operated by Google. Internally, it refers to this model as

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. Google’s documented plan is to capture online publishers on the open

internet and transform them into content creators generating revenue for Google on a completely

closed platform—like YouTube content creators.

19. As a result of Google’s anticompetitive conduct, including its unlawful agreement with

Facebook, Google has violated and continues to violate Sections 1 and 2 of the Sherman Act, 15

U.S.C. §§ 1, 2. Plaintiff States bring this action to remove the veil of Google’s secret practices and

end Google’s abuse of its monopoly power in online advertising markets. Plaintiff States seek to

restore free and fair competition to these markets and to secure structural, behavioral, and monetary

relief to prevent Google from ever again engaging in deceptive trade practices and abusing its

monopoly power to foreclose competition and harm consumers.

II. PARTIES

20. Plaintiff States, by and through their respective Attorneys General, bring this action in

their respective sovereign capacities and as parens patriae on behalf of the citizens, general

welfare, and economy of their respective States under their statutory, equitable, or common law

powers, and pursuant to Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15 & 26.

21. Google is a limited liability company organized and existing under the laws of the State

of Delaware, with its principal place of business in Mountain View, California. Google is an online

advertising technology company providing internet-related products, including various online

advertising technologies, directly and through subsidiaries and business units it owns and controls.

Google is owned by Alphabet Inc., a publicly traded company incorporated and existing under the

laws of the State of Delaware and headquartered in Mountain View, California.

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III. JURISDICTION

22. The Court has jurisdiction over this action under Sections 1 and 2 of the Sherman Act,

15 U.S.C. §§ 1 & 2; Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15c & 26; and under 28

U.S.C. §§ 1331 and 1337.

23. In addition to pleading violations of federal antitrust law, the Plaintiff States allege

violations of state antitrust and consumer protection laws and seek civil penalties and equitable

relief under those state laws. All claims under federal and state law are based upon a common

nucleus of operative facts, and the entire action commenced by this Complaint constitutes a single

case that would ordinarily be tried in one judicial proceeding.

24. This Court has jurisdiction over the non-federal claims under 28 U.S.C. § 1367(a), as

well as under principles of pendent jurisdiction. Pendent jurisdiction will avoid unnecessary

duplication and multiplicity of actions and should be exercised in the interests of judicial economy,

convenience, and fairness.

25. This Court may exercise personal jurisdiction over Google because Google conducts

business in this District. Google has established sufficient contacts in this District such that

personal jurisdiction is appropriate. Google sells the products at issue throughout the United States

and across state lines. Google is engaged in, and its activities substantially affect, interstate trade

and commerce. Google provides a range of products and services that are marketed, distributed,

and offered to consumers throughout the United States, in the Plaintiff States, across state lines,

and internationally.

IV. VENUE

26. Venue is proper in this District under Section 12 of the Clayton Act, 15 U.S.C. § 22,

and 28 U.S.C. § 1391. A substantial part of the events or omissions giving rise to the Plaintiff

States’ claims occurred in this District. Google transacts business and is found within this District.

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V. INDUSTRY BACKGROUND

27. The internet revolutionized the way people consume content, and along with it, the

types of advertisements that companies can purchase to reach consumers. Online image-based ads

on the web called “display” ads, audio ads, and video ads in the online world have largely

supplanted their traditional print, radio, and television counterparts. In addition, the internet

ushered in completely new advertising formats, including targeted text-based ads on search

engines, shareable ads on social media, and specialized ads inside mobile phone applications.

28. For online publishers and advertisers alike, the different online advertising formats are

not interchangeable. Online media companies that operate websites and mobile applications

(“online publishers”) are necessarily restricted in the types of ad formats they can sell. A news

website, for example, can generally sell display ads alongside its news articles but cannot generally

sell search or audio ads to monetize the same content. At the same time, advertisers on the other

end of the transaction purchase one format or another to serve their different goals. For instance,

advertisers purchase search ads to reach consumers actively looking to make a purchase, whereas

they purchase display ads to increase brand awareness.

29. In addition to introducing new advertising formats, the internet changed how online

publishers sell their advertising inventory. Online publishers sell their inventory to advertisers

either directly or indirectly through ad marketplaces. The “direct” sales method refers to

campaigns that the publisher itself sells directly to advertisers, including those campaigns sold by

the publisher’s internal sales staff and through the publisher’s private auctions. For example, USA

Today, as an online publisher, could negotiate directly with Disney, as an advertiser, to display

Disney ads atop the USA Today homepage one million times in a particular month.

30. Publishers also use a specialized distribution channel to sell their ad inventory

indirectly to advertisers. Large publishers usually sell some inventory directly, then sell their

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remaining inventory indirectly. A publisher cannot always predict how many ad spaces it has

available to sell directly to advertisers because it is dependent on the number of users who visit

the publisher’s website; selling inventory indirectly permits publishers to nonetheless sell their

surplus impressions. Additionally, some publishers sell the entirety of their inventory indirectly.

“Indirect” sales occur through centralized electronic trading venues called “ad exchanges” and

through “networks” of publishers and advertisers. In lieu of direct sales, publishers can let ad

exchanges auction their inventory in real time on their behalf and keep a portion of advertising

proceeds in return.

31. Whether online publishers sell their display inventory directly or indirectly, the

advertisements can target specific users in real time. When a user views a website or mobile app,

advertisers purchase the individual spaces for ads (“impressions”) targeted to that user. Google

likes to claim that it will “never sell your personal information to anyone,” but the online ad

impressions Google sells to advertisers target individual users based on their personal information.

32. Finally, because publishers can target ads to specific users in real time, online

publishers manage highly varied, or “heterogeneous,” inventory. One might think that a website

with three pages and three different ad slots per page would have a total of nine unique ad units to

sell. But because online ads are targeted at individual users, the same site with 1,000,000 readers

actually has 9,000,000 different ad units to sell: each of the website’s impressions targeted to each

unique reader. Consequently, an online publisher’s inventory is akin to the inventory of seats at a

baseball stadium: no two pieces of inventory are the exact same and each is valued by its

particulars. In online advertising, this includes the particulars of each person viewing each ad.

A. Online Display Advertising Markets

33. Online publishers and advertisers depend on several different and distinct products to

sell their display inventory. These products include (1) the ad server, which acts as the publisher’s

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inventory management system and helps the publisher sell its inventory, (2) the marketplaces that

match buyers and sellers of display ads (exchanges and networks, separately), and (3) the ad

buying tools that advertisers must use as their middleman to buy display inventory from exchanges.

These products conduct the complex tasks associated with pricing, clearing, executing, and settling

billions of display impressions every month in the United States. Google possesses monopoly

power in each of these distinct markets. Imagine if the financial markets are controlled by one

monopoly company, say Goldman Sachs, and that company then owns the NYSE, which is the

largest financial exchange, that then trades on that exchange to advantage itself, eliminate

competition, and charge a monopoly tax on billions of daily transactions. That is the world of

online display advertising today.

1. Publishers’ Inventory Management Systems (Ad Servers)

34. Large publishers such as CBS, Time, ESPN, Weather.com, and NPR depend on a

sophisticated inventory management system called an ad server to holistically manage their online

display inventory. Ad servers keep track of publishers’ heterogeneous ad inventory and help

publishers sell that inventory both directly and indirectly through exchanges, with the stated goal

of maximizing publishers’ advertising revenue. Publishers typically use a single ad server to

manage all of their display inventory; using multiple ad servers would substantially frustrate a

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publisher’s ability to effectively optimize management of their inventory and maximize revenue.

35. When using an ad server, online publishers necessarily relinquish some control over

inventory management and revenue maximization. While a publisher can adjust some of the ways

that its ad server manages and sells inventory, an ad server’s features and limitations ultimately

limit the publisher’s control. Publishers also rely on the specialization of their ad server to help

them navigate the complexities of electronic trading: ad server account analysts individually advise

online publishers on how to adjust the ad server’s parameters to increase revenue. Put simply, ad

servers advance publishers’ interests.

36. To holistically manage a publisher’s online display inventory, the ad server performs

three internal critical tasks related to selling ad space. First, the ad server identifies the users

visiting the publisher’s webpage in order to manage the publisher’s inventory and maximize its

yield. When a user visits a webpage, the ad server—on behalf of and with the permission of the

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publisher—identifies the user through identification technology facilitated by the user’s web

browser (e.g., Chrome or Safari) and/or mobile device (e.g., Android or iOS). To keep track of

individual users, the ad server assigns each user a unique user ID (e.g., 5g77yuu3bjNH). By

essentially “tagging” users with a unique user ID, an ad server helps publishers, exchanges, and

advertisers know the identity and characteristics of each particular user associated with a

publisher’s ad space. For example, an advertiser can correlate a user’s pseudonymous ID (e.g.,

5g77yuu3bjNH) with the user’s identity (e.g., John Connor) and use that identity “link” to look up

additional information about the user (e.g., John Connor lives in Los Angeles, drives Harley-

Davidson motorcycles, and wears Oakley sunglasses). This, in turn, allows the advertiser to know

the ad space targeted to that user is high value. User IDs are also used to cap the number of times

a user is shown a particular ad to avoid oversaturating the user, so-called “frequency capping.”

Additionally, user IDs facilitate evaluation of ad campaigns’ effectiveness because they allow

publishers and advertisers to track whether a user took a subsequent action (e.g., clicking on an ad,

signing up for a service, or purchasing a product). This “attribution” is critical for some ad

campaign billing models, including cost-per-conversion models whereby advertisers are charged

only when users take a specified action.

37. The second critical task ad servers perform is managing how publishers sell ad space

indirectly through advertising marketplaces such as ad exchanges. Publisher ad servers connect

with marketplaces to let publishers automatically route their inventory into multiple different

marketplaces as the users load publishers’ webpages. The Dallas Morning News currently routes

their online advertising inventory to more than seven exchanges. As the middleman between a

publisher and exchanges, the ad server controls how different exchanges, and even networks, can

access and compete for a publisher’s inventory.

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38. The third critical task performed by ad servers is routing inventory correctly between a

publisher’s direct and indirect sales channels. As Google’s internal documents show, only a tiny

percentage of publishers’ ad impressions are considered

. Indeed, publishers generally make almost all their

revenue— percent—from just a small percent— percent—of their impressions. When a

publisher like ESPN sells their most valuable inventory directly to an advertiser like Fanatics.com

for premium prices, they rely on their ad server to allocate the impressions targeted to high-value

users—e.g., sports fanatics who have a propensity for buying merchandise for their favorite sports

team—to those direct deals. The ad server should then route the impressions that ESPN does not

sell directly to advertisers onward to exchanges.

39. Because the ad server sits between a publisher and the publisher’s indirect sales

channel, ad server can obstruct competition between the multiple exchanges competing for

publishers’ impressions in multiple ways. For example, the ad server might interfere with a

publisher’s ability to share full information about its impressions with exchanges (e.g., the user

IDs associated with each publisher impression). Alternatively, an ad server might block publishers

from knowing how their inventory is performing in particular exchanges. Without this information,

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a publisher cannot reward a better-performing exchange with more of its business. Transparency

fuels competition between marketplaces to maximize value for publishers, and ultimately, for the

consumer.

40. Despite the relative complexity of ad servers, prior to Google’s entrance into the

publisher ad server market, ad servers were “a commodity good.” They charged publishers a low

cost-per-impression rate or a monthly subscription price for the total number of ad impressions

managed and served. However, Google’s conduct has substantially changed the structure of this

market.

41. Google completely controls the publisher ad server market for display inventory

through its product called Google Ad Manager (GAM). Google originally acquired its publisher

ad server in 2008 from DoubleClick. Today, GAM controls over 90 percent of this product market

in the United States. Essentially every major website (e.g., USA Today, ESPN, CBS, Time,

Walmart, and Weather.com) use GAM. As a result, GAM, as the middleman between publishers

and exchanges, has the power to foreclose competition in the exchange market.

2. Electronic Marketplaces for Display Advertising: Exchanges and Networks

42. The vast majority of online publishers in the United States today sell at least some of

their inventory to advertisers indirectly through advertising marketplaces: exchanges and

networks. Large publishers like CNN and The Wall Street Journal mostly use ad exchanges,

whereas smaller publishers like local newspapers and individual blogs mostly use ad networks.

i. Display Ad Exchanges

43. Ad exchanges for display ads are real time auction marketplaces that match multiple

buyers and multiple sellers on an impression-by-impression basis. A publisher’s ad server can

route the publisher’s inventory to such exchanges in real time as users load webpages. These

exchanges then connect with advertisers through their respective middleman, the advertising

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buying tools. In other words, the entities that have a “seat” to bid on exchanges are not the actual

advertisers, like Ford or a local car dealership, but their respective agents. In addition, exchanges

do not bear inventory risk. That is, they only connect publishers’ inventory with an immediate

willing buyer.

44. Ad exchanges are mostly intended for very large online publishers. To sell in ad

exchanges, online publishers must meet minimum impression or spend requirements. For example,

Google’s AdX exchange is only open to publishers that have 5 million page views or 10 million

impressions per month. Such requirements put exchanges out of reach for many small online

publishers, like many local newspapers or blogs.

45. Google owns and operates the largest display advertising exchange in the United States,

historically called the Google Ad Exchange or “AdX,” for short. Google compares its ad exchange

to financial exchanges like the NYSE and Nasdaq. However, AdX is not an open exchange like

the NYSE.

46. Ad exchanges charge publishers a share of transaction value, which is currently 5 to 20

percent (or more) of the inventory’s clearing price. Google’s exchange charges publishers

percent of exchange clearing prices—double to quadruple the prices of its nearest exchange

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competitors. For example, if Google’s exchange sells $100,000 worth of a publisher’s inventory,

Google extracts at least $ . By contrast,

, which results in substantially lower fees on the same $100,000 of inventory.

. Such dramatically different exchange

prices reflects Google’s market power.

47. Google’s exchange fees are also exponentially higher than a similar exchange fee on a

stock exchange where, by contrast, fees are low and set by volume instead of transaction value.

Imagine if the NYSE charged an individual a fee equivalent to a double-digit percentage of the

value of the overall stock trade—e.g., $ as a transaction fee on a $100,000 stock trade. That

is how much Google charges on transactions between an online publisher like ESPN and an

advertiser like Fanatics.

48. Internally, Google concedes that

. As one Google employee frankly

conceded, like Google’s AdX, but

should instead be As this litigation will

make clear, Google can charge these fees because Google uses its monopoly over publishers’ ad

servers to unlawfully foreclose competition in the exchange market.

49. By controlling publishers’ inventory through its ad server and simultaneously operating

the largest advertising exchange, Google has inherent conflicts of interest between publishers’ best

interests and its own. Google charges a low cost for acting as publishers’ sell-side intermediary

but then makes substantially higher fees when selling those publishers’ inventory in its exchange.

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Google has a strong incentive to steer publishers’ inventory towards its exchange where it can

extract a transaction fee the rate of its nearest exchange competitors.

ii. Ad Networks for Display and Ad Networks for Mobile In-AppInventory

50. Whereas large online publishers like CBS and CNN mostly sell their inventory through

ad exchanges, small online publishers like local online newspapers and blogs mostly sell their web

display inventory in marketplaces called “ad networks.” Like ad exchanges, ad networks match

publishers’ inventory with advertisements from advertisers. However, unlike exchanges, networks

do not require publishers to meet high monthly minimum impression and spend requirements.

Networks also obscure prices within auctions, enabling them to capture undisclosed margins—

buyers and sellers cannot know whether the network takes, for instance, 20 or 50 percent of

matched trades. In addition, networks can carry inventory risk. That is, they can purchase

impressions on their own behalf as opposed to on the direct behalf of a specific advertiser or

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on access to Google’s exchange and networks. Google is the bottleneck between publishers and

advertisers.

3. Ad Buying Tools for Large and Small Advertisers

53. Just as publishers rely on ad servers to sell their inventory in ad exchanges, advertisers

use specialized middlemen, ad buying tools, to represent their own interests. Large advertisers use

ad buying tools called demand-side platforms (“DSPs”), while small businesses use pared-down

analogues. Google analogizes these buying tools to “brokerage houses” in financial markets, with

small advertisers using a “fund manager to pick stocks for you” and large advertisers “using

ETrade to pick stocks yourself.”

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54. Just as publishers typically use only a single ad server, small advertisers tend to use

just one intermediary at a time to optimize buying across multiple exchanges and networks. Ad

buying tools let advertisers set parameters integral to their purchasing decisions, including details

about the users they wish to target and the maximum bids they are willing to submit and pay for

particular types of display inventory. On an advertiser’s behalf, an ad buying tool uses these

parameters to automatically bid on ad space in exchanges and networks in an effort to acquire the

space at the lowest cost. Some enterprise buying tools, including The Trade Desk, compete by

minimizing conflicts of interest and representing only the advertiser’s side of the transaction.

55. The ad buying tools made for small advertisers are rarely interchangeable with the ad

buying tools designed for a large advertiser, known as a demand side platform (“DSP”). These two

sets of ad buying tools differ in both the features that they offer and in their minimum spend

requirements. The tools made for large advertisers offer complex bidding and trading options,

which are not appropriate for the smaller advertisers that lack the same sophistication. In fact,

because of the complexity of the tools made for large advertisers, the tools themselves are

frequently not used or managed by the actual advertisers themselves (e.g. Ford), but by the

advertisers’ specialized ad buying team (e.g., an ad agency or the specialized division at an agency

called the “trading desk”). Consequently, the different types of ad buying tools are also sold at

different price levels. The DSP tools made for large advertisers usually require high minimum

monthly spend commitments, sometimes of $10,000 or more, whereas the ad buying tools for

small advertisers can require just a few dollars to get started. For example, Amazon’s enterprise

ad buying tool (i.e. DSP) for large advertisers requires a monthly commitment of over $35,000,

while Google’s buying tool for small advertisers, Google Ads, has a monthly minimum spend of

zero dollars.

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56. When a user visits a publisher’s website, the ad server can route the publisher’s

available impressions to exchanges along with information about the impression, including the

user ID, the parameters of the ad slot, and any rules about pricing. Each exchange then sends a

“bid request” to the ad buying tools who have a “seat” to bid in the exchange and act as advertisers’

middlemen. These bid requests also contain information about the impression at issue and they set

how long advertisers have to respond with their “bid response,” which is called a “timeout.” Within

this timeframe, which is typically a mere fraction of a second, each ad buying tool must unpack

the information contained in the bid request, gather personal information about the user, determine

the appropriate price to bid on behalf of an advertiser, and return the bid response to the exchange

before time expires. After the set time, each exchange closes its auction, excludes late bids, and

chooses a winner. The publisher’s ad server then selects the winning advertisement associated with

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the highest exchange bid and returns it on the user’s page before the page has even finished loading.

The user simply sees a display ad adjacent to the content they are reading. This real-time auction

happens every minute of every day for millions of Americans browsing the internet.

57. To compete effectively in an exchange’s auction, ad buying tools must be able to

identify the characteristics of the user associated with each impression (e.g., an impression targeted

to John Connor or an impression targeted to users who like motorcycles) and return bids to

exchanges before their timeout expires. An exchange as large as Google’s can exclude competition

between the bidders in its auction by giving a subset of bidders an information advantage (e.g.,

more robust information about the user) or a speed advantage (e.g., longer timeouts, which

translates to more time to return bids).

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58. Google operates the largest buy-side middlemen for advertisers, i.e., the ad buying tools

for both small and large advertisers. Google’s enterprise buying tool for large advertisers such as

Toyota or Nestle is called DV360, which Google built from its acquisition of the DSP Invite Media.

Google’s ad buying tool for small advertisers is called “Google Ads” and it is designed for (what

Google calls) the DV360 charges advertisers a

percent commission to purchase inventory from exchanges, whereas Google Ads charges small

advertisers a much higher and undisclosed percent commission when purchasing inventory

from Google’s exchange.

59. Although Google executives considered

they ultimately chose instead to stack the deck in favor of Google by owning the

exchange and giving preferred access to Google’s buy-side middlemen. Google’s exchange gives

Google Ads and DV360 information and speed advantages when bidding on behalf of advertisers.

Such preferred access helps explain why Google’s ad buying tools win the overwhelming

majority—over percent—of the auctions hosted on Google’s leading exchange.

60. Google’s ad buying intermediaries, unlike fund managers and brokers in financial

markets, also do not act in the best interests of their clients. Google subjects the smaller and less

sophisticated advertisers to complicated arbitrages that are extraordinarily difficult to understand.

Specifically, when bidding on behalf of those advertisers on Google’s exchange, Google can

manipulate or adjust their bids. Google also processes their bids through two auctions, keeps a

spread between the two, and does not disclose to the advertiser the price that ad space actually

cleared on Google’s exchange. Google discloses this in fine print distributed across multiple

separate documents. When Google ultimately explains why it “automatically” routes advertisers’

bids across multiple markets, the language is misleading: “If you go butterfly hunting during the

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height of summer, the bigger your butterfly net, the more butterflies you’ll be able to catch.”

Google, however, does not clarify who it is hunting.

VI. THE RELEVANT MARKETS AND GOOGLE’S MARKET POWER

A. Publisher Inventory Management: Publisher Ad Servers

1. Publisher ad servers in the United States are a relevant antitrust market.

61. Publisher ad servers for web display inventory in the United States are a relevant

antitrust product market. Publisher ad servers are inventory management systems that publishers

use to holistically manage their online display advertising inventory—the image-based graphical

ads alongside web content. They provide features such as: (1) reservation-based sales technology

to support a publisher’s direct sales efforts; (2) inventory forecasting technology to help a publisher

determine what inventory will be available to sell; (3) a user interface through which a publisher’s

sales team can input directly sold campaign requirements; (4) co-management of direct and

indirect sales channels; (5) report generation of ad inventory performance; (6) invoicing

capabilities for a publisher’s direct campaigns; and (7) yield management technology.

62. Most publishers single home and use one ad server to holistically manage all their web

display inventory. When a publisher sells more than one type of inventory (e.g., web display, in-

app, or video), then they may use one ad server product for their display inventory and a second

ad server for their in-app or video inventory or an ad server that manages more than one format.

Were a publisher to use multiple ad servers for the same format, they would have to resolve

conflicts between ad servers, thereby defeating the point of an ad server’s inventory management

functions.

63. Publisher ad servers are unique. They are not interchangeable with exchange, network,

or ad buying tools for large or small advertisers. Those tools do not similarly manage a publisher’s

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direct sales channel or offer the reporting, invoicing, or forecasting functions that publishers need

to holistically manage inventory and optimize yield.

64. Google, when seeking to acquire DoubleClick, made explicit representations to the

Federal Trade Commission regarding the non-interchangeability of ad servers and advertising

marketplaces. Google described any suggestion that ad servers and ad networks are

interchangeable as Specifically,

with regard to its ad server, then called “DFP,” and its display ad network, which Google referred

to as “AdSense,” Google stated:

In other words, Google already

acknowledges that while other publisher ad servers are substitutes for Google’s ad server, ad

networks and other advertising marketplaces are not.

65. The customers of publisher ad servers are large publishers who need to manage both

direct and indirect sales channels, including for example, online publishers such as CBS, Spotify,

Time, ESPN, Major League Baseball, Walmart, Weather.com, The New York Times, The Wall

Street Journal, eBay, NBC, Pandora, Trip Advisor, NPR, Buzzfeed, and many more.

66. With respect to the publisher display ad server product market, the relevant geographic

market is the United States. Publisher ad servers available in other countries are not a reasonable

substitute for ad servers available in the United States. Therefore, the United States is the relevant

geographic market.

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2. Google has monopoly power in the publisher ad server market.

67. Google has monopoly power in the publisher display ad server market in the United

States. Google’s monopoly power in this market is confirmed by its high market share. More than

90 percent of large publishers use Google’s publisher ad server, Google Ad Manager (“GAM”

f/k/a “DFP”), according to published reports. Google internal documents also measured that GAM

served the vast majority— percent—of all online display ad impressions in the United States in

the third quarter of 2018.

68. Google’s own documents confirm that it has held a consistent monopoly position in the

publisher ad server market for display inventory for at least a decade. By 2012, just four years after

Google acquired DoubleClick, Google estimated that percent of large online publishers in the

United States used Google’s ad server. Since then, Google’s closest competitors have either exited

the market entirely or have been relegated to negligible market shares.

69. Google’s monopoly power in the publisher ad serving market is further confirmed by

direct evidence. Google has charged supra-competitive fees and degraded quality in the publisher

ad server market, defying the existence of any competitive restraints whatsoever. For example, as

part of managing publishers’ indirect sales channels, publisher ad servers can charge publishers a

fee for routing their inventory to exchanges and networks. When deciding how much to charge

publishers for routing their inventory to non-Google exchanges, Google

and did not

consider competitive constraints such as what the market would bear. On top of this, Google’s ad

server charges a percent fee of gross transactions for routing publishers’ inventory to ad

networks. When publishers route their inventory to exchanges and networks using the competing

product called header bidding, publishers pay no fee whatsoever for routing to exchanges.

Google’s monopoly power over ad servers is also exhibited by the manner in which Google can

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and does degrade the quality of its publisher ad server. The examples here are numerous and

discussed throughout this Complaint. One example is Google’s prohibition on publishers setting

different price floors for different ad exchanges and ad buying tools, which depressed publishers’

ability to maximize inventory yield. Despite widespread publisher dissatisfaction over the price

and quality of Google’s ad server, Google has not suffered any loss to its ad serving market

dominance.

70. Google’s market power in the publisher ad server market is also protected by significant

barriers to entry. One barrier to entry is switching costs. Switching online ad servers is risky and

resource intensive. Some publishers have inventory on hundreds of thousands, or even hundreds

of millions, of webpages, which makes switching ad servers exceedingly expensive, difficult, and

time consuming. Moreover, the switching process also entails significant revenue risk; any glitch

during the transition can disrupt delivery of advertiser campaigns on the publisher’s website, which

would jeopardize the publisher’s ability to collect advertising revenue. Industry experts compare

a change in ad servers to “switching engines in mid-flight.” Google’s internal documents

. In addition to high switching costs, Google imposes additional

barriers to entry in the ad server market through anticompetitive conduct.

B. Display Ad Exchanges

1. Display ad exchanges in the United States are a relevant antitrust market.

71. The market for web display advertising exchanges in the United States is a relevant

antitrust product market. These exchanges are marketplaces that auction multiple publishers’

display inventory to multiple end-advertisers through advertisers’ middlemen on an impression-

by-impression basis and in real time. On the sell side, exchanges generally interface with

publishers through publishers’ ad servers such as Google’s ad server. On the buy side, they

interface with advertisers through ad buying tools, including ad buying tools for large advertisers,

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such as DV360 and The Trade Desk, ad buying tools for small advertisers, such as Google Ads,

and sometimes, even networks.

72. Ad exchanges are not interchangeable with publisher ad servers, ad networks, or ad

buying tools. Publishers cannot sell their display ad inventory on an impression-by-impression

basis and in a real-time marketplace to end-advertisers using publisher ad servers, networks, or ad

buying tools. Moreover, unlike ad networks, ad exchanges are designed to integrate with multiple

ad buying tools so that advertisers can optimize trading across exchanges; networks are more

restricted. Reflecting the fact that exchanges and networks offer different feature sets, exchanges

require publishers to commit to a large monthly volume of impressions or revenue, whereas

networks typically do not. Publishers that use Google’s ad server to sell their display ad inventory

through ad marketplaces primarily sell their inventory in exchanges, not networks. As an example,

one major online publisher in the United States sold over 80 percent of their indirect display

inventory to exchanges, not networks.

73. Ad exchanges are also not interchangeable with the direct sales channel, for publishers

and advertisers. For publishers, selling inventory directly requires that they develop expertise

around managing, selling, and serving campaigns, which requires a specialized skill set and is

expensive to do. For advertisers, buying inventory directly from publishers also requires an

additional skill set and ongoing investment. For direct deals, publishers and advertisers must

typically hire and maintain internal staff to manage these one-to-one relationships. As a result, the

direct sales channel tends to be reserved for high-value publisher-advertiser transactions. For

instance, an online publisher like The Wall Street Journal would not directly transact with the

advertiser Ford if the monthly value of the transactions was not at least several thousand dollars.

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They would, however, gladly transact with Ford indirectly through an ad exchange even if the total

value of monthly transactions was minimal, even a few dollars.

74. With respect to display ad exchanges, the relevant geographic market is the United

States. Display ad exchanges available in other countries are not a reasonable substitute for display

ad exchanges available in the United States. Therefore, the United States is a relevant geographic

market.

2. Google has monopoly power in the display ad exchange market.

75. Google has monopoly power in the United States in the display ad exchange market.

Google’s leading exchange, historically called AdX, transacts over percent of all display ad

inventory sold on ad exchanges in the United States, based on an analysis of data from November

2018 to October 2019. Despite an early competitive landscape, Google’s display ad exchange has

been the top exchange in the United States since at least 2013. Additionally, analysis of more

recent publisher and exchange data shows that Google’s share of the ad exchange market has

substantially increased above percent since Google’s introduction of Unified Pricing rules in

late 2019. Finally, for online publishers reaching high-value users, Google’s exchange transacts

an even greater share of publishers’ exchange impressions. For example, Google’s exchange

transacts over percent of one major online publisher’s exchange impressions, even though the

publisher routes and sells its impressions in at least six other exchanges.

76. The closest competitors to Google’s exchange include exchanges from Rubicon,

AppNexus, and Index Exchange, and those exchanges transact a much smaller share of publishers’

exchange impressions. While a review of major online publishers’ exchange records demonstrates

that Google’s exchange routinely transacts over percent of indirect impressions that flow

through exchanges, Google’s closest exchange competitors typically transact only percent

of the same publishers’ exchange impressions.

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77. Direct evidence further illustrates Google’s monopoly power in the display ad

exchange market. Google’s exchange has the power to control prices. It charges supra-competitive

prices, which are around percent of every trade. Google’s closest exchange competitors

charge than the prices of Google’s exchange. For example, Index Exchange

charges percent, Rubicon charges percent, and AppNexus has charged between

percent.

78. Google’s insulation from price pressure in the exchange market also demonstrates the

substantial market power of its exchange. Google’s internal documents in 2018 observed that

But Google did not reduce its

take rate. In fact, comparing 2017 to 2019, Google’s exchange take rate actually increased (from

percent for third-party buyers buying through AdX in 2017 to percent in 2019).

79. The market power of Google’s exchange is also evidenced by the fact that it has not

lost market share when its exchange competitors drop their prices. For example,

.

80. Google’s market power in the exchange market is also protected by a barrier to entry.

New entrants must achieve sufficient scale and network effects to attract publishers and advertisers

to use their exchange. In addition, Google’s anticompetitive conduct has created artificial barriers

to entry. One significant Google-created barrier arises due to Google’s publisher ad server

preferentially routing trading to Google’s exchange through a host of anticompetitive conduct

addressed below. Google creates another barrier to entry by exclusively and preferentially routing

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the bids of advertisers using DV360 and Google Ads to its ad exchange through a host of other

anticompetitive conduct discussed below.

C. Display Ad Networks

1. Display ad networks in the United States are relevant antitrust market.

81. The market for display ad networks in the United States is a relevant antitrust product

market. Display ad networks are marketplaces that match small publishers’ ad inventory with

advertisers without providing impression-by-impression price transparency to the sell or buy sides

of the transaction. Networks obscure prices within auctions, enabling them to capture undisclosed

margins—buyers and sellers cannot know whether the network takes, for instance, 20 or 50 percent

of matched trades. In addition, networks can carry inventory risk. That is, they can purchase

impressions on their own behalf as opposed to on the direct behalf of a specific advertiser or

advertiser middleman.

82. Ad networks are not interchangeable with publisher ad servers, exchanges, or ad buying

tools. While networks, like exchanges, are marketplaces for advertising inventory, they are not

interchangeable with exchange marketplaces because they operate in a different manner and serve

a different type of publisher. Networks do not offer the same type of impression-by-impression

price transparency to publishers and advertisers that exchanges do. Display ad networks also

typically serve much smaller publishers that do not have sufficient traffic to sell their inventory

through exchanges. Networks require little to no upfront spending by publishers, and publishers

can join networks to sell their inventory even if they do not have much inventory to sell. For

example, AdSense publishers on the Google Display Network do not have monthly page view or

impression requirements. These types of publishers typically include local newspapers, niche

websites, blogs, and more.

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83. With respect to display ad networks, the relevant geographic market is the United

States. Display ad networks available in other countries are not a reasonable substitute for display

ad networks available in the United States. Therefore, the United States is a relevant geographic

market.

2. Google has monopoly power in the display ad network market.

84. Google has monopoly power in the display ad network market in the United States.

Google describes its ad network, the Google Display Network (“GDN”), as

Google’s network reaches more user impressions and websites than any

other display network, including over 2 million small online publishers globally. Google has

immense scale amongst the long tail of small online publishers.

85. Direct evidence confirms the monopoly power of Google’s display ad network. GDN

charges very high double-digit percent commission on advertising transactions, which,

according to public sources, is the “standard rate” elsewhere in the industry. Internally,

Google acknowledges that its fees are very high and that Google can demand high fees because of

its market power. For example, in one internal 2016 conversation, Google executives commented

that Google’s ad networks make by retaining a percent commission while

also noting that they

explained one Google employee when addressing the lack of

viable competing ad networks available to its customers.

86. The market power of Google’s display ad network is protected by barriers to entry.

Google imposes a significant barrier to entry by using its publisher ad server to preferentially route

trading to its display ad network through a host of anticompetitive conduct addressed below.

Google also generates a further barrier when its ad buying tool Google Ads preferentially routes

trading to its GDN ad network through a host of anticompetitive conduct discussed below. Finally,

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ad networks need scale on both the supply and demand sides; natural network effects make it

difficult for any new networks to enter and achieve scale.

D. Display Ad Buying Tools for Large and Small Advertisers

1. Display ad buying tools for small advertisers in the United States is a relevantantitrust market.

87. The market for display ad buying tools for small advertisers in the United States is a

relevant antitrust market. These tools provide an interface that smaller advertisers such as real

estate agents, plumbers, builders, doctors, and car dealerships can use to bid on and purchase the

display ad inventory trading on ad exchanges and in ad networks. In this respect, these tools allow

advertisers to optimize for their own interests, including purchasing quality display ad inventory

for the lowest prices.

88. Ad buying tools for small advertisers are not interchangeable with ad buying tools for

large advertisers, which are sometimes called demand-side platforms (or “DSPs”). The two sets of

tools serve different types of advertisers, exhibit different pricing and entry levels, and offer

different feature sets.

89. Ad buying tools for small advertisers are also not interchangeable with ad servers, ad

networks, or ad exchanges. Exchanges, servers, and networks do not provide small advertisers

with a buying interface to bid on and purchase ad inventory in exchanges or networks.

90. The relevant geographic market for display ad buying tools for small advertisers is the

United States. Display ad buying tools for small advertisers available in other countries are not a

reasonable substitute for the tools available in the United States. Therefore, the United States is a

relevant geographic market.

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2. Display ad buying tools for large advertisers in the United States is a relevantantitrust market.

91. The market for display ad buying tools for large advertisers in the United States is a

relevant antitrust market. These tools provide an interface that large advertisers, such as Ford

Motor Company, use to bid on and purchase display ad inventory on ad exchanges and in ad

networks. In this respect, they are the buy-side counterpart to publisher ad servers, allowing large

advertisers to optimize for their own interests, such as buying display ad inventory for the lowest

price.

92. The enterprise ad buying tools for large advertisers are not interchangeable with the ad

buying tools made for small advertisers. The tools for small advertisers do not meet the

transparency, optimization, sophistication, or bidding needs of large advertisers.

93. The relevant geographic market for display ad buying tools for large advertisers is the

United States. Display ad buying tools for large advertisers available in other countries are not a

reasonable substitute for the tools available in the United States. Therefore, the United States is a

relevant geographic market.

3. Google has monopoly power in the ad buying tool market for small advertisers.

94. Google’s ad buying tool “Google Ads” has monopoly power in the United States in the

ad buying tool market for small advertisers. Buying tools for small advertisers serve startups and

local businesses such as real estate agents, doctors, dentists, restaurants, automotive repair shops,

craftsmen, electricians, hair salons, architects, and landscapers. Google’s records reveal that

advertisers using Google Ads purchase percent or more of the impressions in Google’s

exchange, the largest exchange, and over percent of the impressions on Google’s display

network, GDN.

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95. The market power of Google Ads is also evidenced by the fact that Google’s exchange

charges supra-competitive fees for exclusive access to Google Ads advertisers. Google’s

documents confirm as much, describing

.

The ability to extract such rents, dependent on Google Ads exclusivity, demonstrates Google Ads’

monopoly power. Running sequential auctions allows Google to extract additional non-transparent

margins, which is not disclosed to advertisers.

96. Google Ads also has market power over the small advertisers it serves because most

rely on a single ad buying tool for a given advertising format (e.g., display ads) and have switching

costs. Using multiple ad buying tools imposes additional costs on advertisers because of the

additional time, effort, training, and expense needed to manage campaigns across tools; Google

Ads also does not let small advertisers completely export the data they need to easily switch to

another tool. As a result, while very large advertisers might be able to absorb the costs of using

more than one tool at a time, small advertisers almost always use just one ad buying tool at a time.

97. Google’s market power with Google Ads is protected by four critical barriers to entry.

First, Google Ads charges opaque fees and does not let advertisers readily audit the ad inventory

Google purchases on their behalf, both of which act as a barrier to entry because they impede

advertisers from switching to a low-cost provider. Second, Google’s practice of withholding

YouTube video inventory from rival ad buying tools locks small advertisers who use one tool at a

time into Google’s ad buying tool. In addition, other providers of buying tools indicate that it does

not make economic sense to try to compete with Google Ads for small advertisers, because they

cannot achieve sufficient scale with smaller advertisers who want to buy display, YouTube, and

even search ads, through just one tool. Finally, advertisers use ad buying tools to keep track of the

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competition from 24/7 Real Media (owned by WPP PLC), aQuantive (owned by Microsoft), and

ValueClick (publicly traded).

100. Google, however, quickly began pursuing a strategy to foreclose competition in both

markets. At the time, Google operated an ad buying tool for small advertisers and had market

power in this market. Nearly advertisers—including restaurants, clothing stores,

doctors, and electricians, across the country—used its ad buying tool for small advertisers to bid

on display ad space. Immediately after acquiring a publisher ad server and launching its exchange

in 2009, Google made it so the small advertisers bidding through Google Ads had to transact in

both Google’s ad network and Google’s ad exchange. Google also made it so that the large

publishers wanting to receive bids from the many advertisers who used Google’s ad buying tool

had to trade in Google’s exchange and license Google’s ad server. Google demanded that it

represent the buy-side, where it extracted one fee, as well as the sell-side, where it extracted a

second fee, and force transactions to clear in Google’s exchange, where Google extracted a third

fee.

101. For at least a decade, Google has had market power in the United States as an ad buying

tool for small advertisers. Google originally called its product for small advertisers AdWords,

rather than Google Ads. In 2009, 250,000 small- to medium-sized advertisers in the United States

used its ad buying tool to purchase search and display ads. Since then, the number of advertisers

using its tool to purchase display inventory on exchanges has rapidly increased. In 2013, the

number of advertisers using Google Ads doubled to two million. Today, millions of small- to

medium-sized businesses use Google Ads to bid on and purchase display ad space trading in

Google’s AdX exchange and those advertisers do not have alternative tools to use.

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102. Part of the reason that Google was able to gain a monopoly in the market for ad buying

tools for small advertisers was because Google had a monopoly in the display ad network market

and the search advertising markets. Advertisers had to use Google Ads to purchase ad space

through Google’s ad network, GDN, which was the leader in reach (unique visitors) among

competitors in 2009. Small advertisers also had to use Google Ads to purchase Google Search

inventory, a market in which Google had a monopoly since 2005. As background, the FTC

investigated Google’s practice of withholding its Search advertising inventory from rival

advertiser buying tools, and Google voluntarily amended its withholding conduct in 2013.

However, by that time, the damage was done. By 2013, Google has successfully pushed

competition out of the market.

103. Google Ads also had market power over its small advertisers because those advertisers

almost always use one tool at a time when bidding for ad space. When deciding which ad buying

tool to use, most advertisers chose Google’s because it was the only way to purchase search ads

and display ads on Google’s leading display network GDN.

104. Google monopolized the exchange and ad server markets by forcing publishers to

license Google’s ad server and trade in Google’s exchange in order to receive bids from the one

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million advertisers using Google’s buying tool, Google Ads. First, Google automatically routed

small advertisers’ GDN bids to Google’s exchange. Additionally, Google only routed small

advertisers’ bids to Google’s new exchange and refused to route advertisers’ bids to non-Google

exchanges, even though those exchanges might have been selling identical ad space for lower

prices. Next, Google programmed its exchange to return real-time bids only to those publishers

using Google’s new publisher ad server.

105. In doing so, Google acted against the best interests of the small advertisers bidding

through Google Ads. If Google were serving the interests of the small businesses using Google

Ads, Google would have routed their bids to the exchanges that offered the lowest prices for the

identical goods, just as competing ad buying tools did. In a competitive market, advertisers prefer

to buy across multiple exchanges in order to reach the largest possible pool of supply at the best

possible prices, thereby enabling and fostering exchange competition.

106. Internal Google documents show that Google imposed these bid routing restrictions for

the purpose of foreclosing competition. In a Display Strategy document from August 2012, Google

noted that they

107. Because publishers are interested in exchanges returning real-time bids for their

inventory, Google effectively required publishers to use its publisher ad server in order to work

with its exchange. Publishers also only use a single ad server at a time to manage inventory, which

meant they had to either forgo the use of any competing ad server or forgo access to the enormous

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pool of advertisers bidding through Google Ads. From the first days of Google’s AdX exchange,

advertisers bidding through Google Ads made up the vast majority of purchases in Google’s

exchange: around of total transactions by revenue within a year of AdX’s launch, percent

of total transactions a few years later, and about of all transactions today.

108. A news article in The Wall Street Journal explained Google’s conduct as follows:

“Using Google’s DoubleClick for Publishers is the only way to get full access to Google’s AdX

exchange, publishers say. For many years, Google’s AdX was the only ad exchange that had

access to this fire hose of ad dollars.”

109. Google’s conduct successfully foreclosed competition in the publisher ad server and

exchange markets. When Google acquired the DoubleClick ad server in 2008, Google’s share of

this market was around 48 to 57 percent, and Google faced significant competition in both the ad

server and ad exchange markets. In the ad server market, Google has now effectively foreclosed

publisher ad server competition from companies that included 24/7 Real Media, aQuantive, and

ValueClick. As internal Google documents show, by coupling its ad server with its market power

on the buy side, Google prevented customers from switching to competing ad servers and quickly

cornered the rest of the market. By 2011, Google’s ad server was used by approximately percent

of publishers in the United States, and by 2019, Google’s share of the market increased to over

percent of large publishers.

110. Google maintained its monopoly power over ad servers and its stranglehold in the ad

exchange market by continuing the same exclusionary conduct. In 2016, Google started technically

routing the bids belonging to small advertisers using Google’s buying tool to non-Google

exchanges, but Google significantly and intentionally restrained the routing of bids to non-Google

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exchanges. Google’s exchange continued to only return live bids to publishers using Google’s ad

server. Google did not want to actually undo its AdWords—exchange—ad server tie.

111. Google similarly requires publishers seeking access to large advertisers’ bids to trade

in Google’s exchange (and pay Google’s exchange fees) and to license Google’s ad server (and

pay Google’s ad server license fees). Google’s strategies here are numerous and discussed

throughout this Complaint. For instance, Google uses mandatory price floors (discussed below in

paragraphs 231-235) and other auction manipulations like the program (discussed below

in paragraphs 132-138) to force publishers to transact with DV360 advertisers in Google’s

exchange. Uniform price floors are not competition on the merits. For reasons discussed further

below, uniform price floors force publishers to trade with DV360 advertisers in Google’s

exchange. On top of using Unified Price floors, Google created another program called

. Finally, Google makes many of

the features in DV360 (e.g., affinity audiences targeting) unavailable to advertisers if they

participate in exchanges other than Google’s, which results in many advertisers using Google’s

exchange even though they would not do so in a competitive market. Because Google’s exchange

then only routes live bids to publishers using Google’s publisher ad server, publishers are

effectively forced to use Google’s publisher ad server to receive bids from DV360 advertisers.

This conduct permits Google to maintain its monopoly power in the publisher ad server market

and exclude competition in the exchange market. Google has specifically discussed this

effect internally.

B. Google uses its control over publishers’ inventory to block exchange competition.

112. In addition to foreclosing exchange competition by forcing publishers to transact in

Google’s exchange, Google used its control over publishers’ inventory and its status as publishers’

agent to foreclose exchange competition through a pattern of anticompetitive conduct. Google

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restricted publishers from selling their inventory in more than one exchange at a time, started

routing publishers’ inventory to Google’s exchange, and blocked publishers from accessing and

sharing information about their heterogeneous inventory with exchanges. In doing so, Google

foreclosed exchange competition and dramatically increased the cost of transacting on ad

exchanges, enabling Google’s exchange to charge very high fees that even Google could not justify

internally. Internally, Google admitted that an exchange should be more of

and not as it is for Google.

Google’s anticompetitive conduct, however, ensured that publishers and advertisers could not

benefit from any such .

1. Google blocks publishers from sending their inventory to more than onemarketplace at a time.

113. Competition between exchanges promotes price competition. To circumvent this,

Google impeded real-time competition between marketplaces by forcing publishers (sellers) to

route their ad space to a single exchange, one at a time, rather than all at once. The industry referred

to this practice as waterfalling.

114. Starting in 2009, advertising exchanges, including Google’s ad exchange, were

designed to compete with one another by submitting real-time bids for publishers’ inventory. Ad

exchanges could consider publishers’ impressions and return live bids for publishers to consider,

accept, or ignore, all in real time.

115. Just as exchanges want to simultaneously compete for publishers’ inventory, publishers

want to route their ad space into multiple exchanges to benefit from access to greater advertiser

demand. One exchange might have an advertiser willing to bid a $2 dollar CPM (cost per thousand)

for a publisher’s impression, but another exchange might have a different advertiser offering a

higher price of $3 dollars.

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116. In addition, publishers wanted to drive competition between exchanges so that the

exchanges would compete on price and quality. Competition between exchanges forces exchanges

to compete on quality and price, regardless of whether they operate in financial markets or openly

traded online display ads. The sellers and buyers in an exchange often measure an exchange’s

efficiency using the tightness of the bid-ask spread—the difference between the bid (the amount

for which buyers are willing to sell the instrument) and the ask (the amount for which sellers are

willing to sell the instrument). Competition between electronic exchanges leads to pressure on

exchange prices and results in efficiency gains through smaller bid-ask spreads.

117. Google, however, foreclosed exchange competition in this manner from 2009 and

through 2016. Google used its new control over publishers’ inventory through its publisher ad

server, and Google’s control of that market, to impose on publishers a one-exchange-rule: route

inventory to only one exchange at a time. In doing so, Google impeded competition between

exchanges.

2. Google gives itself preferential treatment by routing publisher inventory to itsown ad exchange and blocks competition from other exchanges.

118. In addition to blocking real-time competition between exchanges, Google’s ad server

foreclosed exchange competition by preferentially routing publishers’ inventory to Google’s new

exchange through a process it called “dynamic allocation.” At a high level, dynamic allocation

granted Google’s exchange a superior right of first refusal on all of a publisher’s impressions made

available to exchanges. Google blocked other exchanges from competing against its exchange for

the same inventory on the same footing.

119. Google’s adoption of dynamic allocation in 2010 ended DoubleClick’s neutrality as a

seller’s agent. DoubleClick operated a publisher ad server but did not have an operational

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exchange. In the period immediately before Google purchased DoubleClick, the DoubleClick

publisher ad server routed publishers’ impressions to exchanges and networks in a neutral manner.

120. Dynamic allocation also let Google’s exchange clear publishers’ inventory for

depressed prices. Google’s ad server let Google’s exchange compete for publishers’ impressions

by returning live bids while requiring non-Google exchanges to compete for the same impressions

with static non-live bids. Usually, an exchange’s static bid was set to equal the overall price the

exchange historically paid for publishers’ impressions. Google’s ad server passed the rival’s static

bid to Google’s exchange and permitted Google’s exchange to purchase the impression by paying

at least one penny more. In other words, Google used its control over publishers’ inventory to let

its exchange view a publisher’s valuable impressions—like a box seat at a baseball game—and

purchase that impression for just a penny more than the average price that a non-Google exchange

paid for any old impression—just like the average price for any seat in the stadium.

121. With